New hike in probate fees – another stealth tax on the middle class?
Despite overwhelming opposition, the government looks set to introduce a substantial increase in probate fees that will take effect from April 2019. Aimed at the wealthiest members of society, this new stealth tax is expected to raise £145 million in its first year, with the proceeds being used to subsidise court reforms.
Under the new rules, no probate fee will be payable on estates worth less than £50,000. However estates worth between £50,000 and £300,000 will incur probate fees of £250, estates worth between £300,000 and £500,000 will incur £750 in probate fees, and estates worth between £500,000 and £1 million will be liable to probate fees of £2,500. Higher-value estates will attract incrementally higher probate fees of £4,000 and £5,000 respectively, up to a top-rate band of £6,000 for estates worth more than £2 million.
These new charges represent a major departure from the current fees of £215 for a personal probate application or £155 for a solicitor’s application – and I have several concerns. Firstly, it creates an unjust precedent of charging court fees that are disproportionate to the amount of work undertaken by the court. By the government’s own admission, the work required to issue a grant of probate for a high-value estate is usually no more than that required for a more modest estate. Secondly, it is not clear how the executors will be expected to pay up-front fees while the estate assets are frozen – it seems probable that this burden will fall on the executors personally.
Thirdly, the new probate fees are likely to have significant repercussions for charities. The Institute of Legacy Management has speculated that such a hike could cost charities £10 million a year in lost legacy income, losses that the government could have avoided by exempting charitable organisations. But perhaps the most concerning consequence of the new fee structure may prove to be that it acts as a disincentive to make a will in the first place, encouraging people to opt instead for lifetime gifting or to rely on survivorship rules, tactics that may have undesirable outcomes for those acting without the benefit of sound legal advice.
Whatever the wider impact of this probate fee hike, it now seems inevitable that the wealthier you are on death the higher the fees payable on your estate will be – and you have limited scope to mitigate this.General, George Ide, News, Private Client